The Israeli Tax Authority has put forward a draft tax guideline on how to treat Bitcoin. The announcement on the 11 January 2017 in their official publication sets out these proposed guidelines. The official position is to treat Bitcoin as a ‘virtual currency’ for taxation purposes.
The nature of categorising Bitcoin as a virtual currency has two main effects. The first is that they will be considered as an asset. The second consideration is that Bitcoin will be taxed using ordinary fixed tax rates. Mainly, this is due to the fact that, unlike in the UK, the Central Bank of Israel does not view Bitcoin as a foreign currency when it comes to taxation.
In practice, it would appear that when Bitcoin is sold, the sale itself will be taxed the same way as for generic property. This means that the purchase and sale of Bitcoin will be subject to the 17% VAT. At the same time, any income from the sale of Bitcoin will be subject to capital gains tax. This is equivalent to 25% of the revenue accrued.
Further, any business engaged in the trading or mining of Bitcoin will be subject to ordinary business rates. It should also be pointed out that the proposed guidelines state that any payment received in Bitcoin will be treated as a barter transaction.
At the moment, these are draft guidelines that are being circulated. Once the official guidelines have been implemented, it will be reflected on the BitLegal World Map.